Archive for August, 2014

Mast Kalandar is a North Indian quick service restaurant chain that has branches in Bangalore, Pune and a few other Indian cities. I happened to visit one of its outlets recently. After placing my order at the cashier and making the payment, I received the receipt for my purchase. By chance, I noticed a mention of a loyalty program at the bottom of the receipt.

Since the last line or two of the receipt was torn, I couldn’t figure out what exactly I had to do to join the program and asked the cashier for clarification. She was clueless.

There was a lot of POP material inside the restaurant (e.g. posters about media coverage received by the company) but I couldn’t spot any info about the QSR’s loyalty program. The last two lines of the receipt seemed to carry the only mention of the program. So I asked for a duplicate receipt, hoping to figure out the next steps for enrollment by myself.

Some uniformed employee installing paper in the printer gruffly told me that they couldn’t issue a duplicate receipt. At best, they’d place a seal to authenticate the receipt. He didn’t realize this defeated the entire purpose for my requesting a duplicate receipt.

Mast Kalandar’s loyalty program started on this wrong note and steadily went downhill thereafter.

I told the cashier I wanted to sign up. She had no clue what to do. When I pushed her, she checked with somebody in the kitchen and gave me some sketchy details but still no one had any idea of how the program worked in terms of Earn Ratio (how much spend translated to how many reward points) or Burn Ratio (how many reward points translated to what value of gift).

I nevertheless decided to join. My delight at not being issued a long form to fill was shortlived: Enrollment required me to write down my personal details on a register kept at the payment counter. Since the register was wide open, everyone could see everyone else’s contact information, which I found a violation of privacy.

No one knew what the 6-digit code meant

Anyway, having come thus far, I decided to go ahead and wrote out my name, mobile phone number, email address and date of birth on the register. The cashier asked me to return after a half hour to collect the plastic card.

When I did that, I noticed that there was a scratch panel on the back of the card. I scratched it out and found a six digit number. By that time, I’d received an SMS mentioning my 16-digit Loyalty Card number. So, I knew this 6-digit # couldn’t be my membership ID. The purpose of this number was not explained anywhere.

More importantly, I found that my account had zero reward points. Which meant that my that day’s spend hadn’t earned any rewards. I found this almost to be a breach of trust and, when I inquired with the staff, was told that only subsequent purchases would be eligible for points. This is a stupid discrepancy likely caused by a technical constraint in the software used by Mast Kalandar to run its loyalty program.

On my next visit, I’d forgotten to carry my loyalty card. This happens quite often and reiterates why mobile wallets should focus on loyalty, rather than payment, cards as I’d highlighted in Mobile Wallets Should Fix What’s Broken – And It Ain’t Payments. But I digress. When I mentioned to the cashier that I was a member of their loyalty program and asked him how I could accrue rewards for the purchase, he noted down my mobile phone number and promised to credit my account with the rewards due from the purchase. Many months later, I still haven’t received any confirmation that this has happened.

It’s over five months since I enrolled for Mast Kalandar’s loyalty program. During this period, I haven’t received a single message from the QSR enticing me back to its restaurant. And, you guessed right, I haven’t made any repeat purchase. If you’re thinking that’s not a great badge of honor for a loyalty program, you’re not alone.

At the risk of sounding overcritical, Mast Kalandar shows how not to run a loyalty program.

There’s no shortage of studies about the hidden costs of cash. Take this recent HBR report for example. On the face of it, they all make a solid case for society to turn cashless from tomorrow.

However, upon scratching the surface, I’ve never found a single one of these articles penned by merchants who are the biggest victim of these purported hidden costs of cash. On the other hand, every merchant I’ve come across gladly accepts cash. Some of them go out of their way to spurn cards despite posting “Visa / Master Welcome” signs in their premises.

When it comes to payment modes, why’s there such a huge disconnect between views expressed from ivory towers and behavior patterns witnessed on the ground?

Is it because of the allegedly high MSC / MDF fees incurred by merchants for accepting cards? Maybe. But, I think the real reason goes beyond that explicit cost.

The cab industry, which is notorious for shirking cards, provides a good clue for understanding the root cause of this disconnect.

I’ve encountered several cab drivers who wriggle out of their company’s commitment to accept cards with antics like:

Covering the POS machine with a cloth or old sock, signaling that cards won’t be accepted.

Claiming that the printer is not working, therefore cards can’t be accepted.

Pressing the wrong button on the POS machine when I present a card and showing me the inevitable error message on the display as reason for inability to accept card payments owing to “server problems”.

Generally, I don’t bother to get into an argument and move on after paying with cash.

But I decided to probe a little deep when I recently came across a cabbie who readily agreed to accept cards when I made that a precondition of engaging his cab. Midway through the ride, the cabbie swerved into a petrol pump and filled petrol. Instead of paying for the fuel by cash from his pocket, he asked me to swipe my credit card. He assured me that the fuel cost would more or less equal the fare, which I wouldn’t need to pay at the end of the ride.

In essence, the cabbie fulfilled his commitment to accept credit card but palmed off the actual transaction to the gas station.

Struck by this cabbie’s ingenious tactic for evading a card payment, I launched into a diatribe about the hidden costs of cash and asked him why he avoided cards so vehemently. This is what he told me:

When customers paid by cash, the cabbie got the money immediately. However, when they paid by card, the money went to the cab dispatch company from where the cabbie had to collect it. This task took two days and required at least one fareless trip to the company’s office. As a result, accepting cards was not good for his business. (But, as I couldn’t help noting sardonically, it was good for the cab dispatch company’s cash flow).

The cabbie’s response exposed a major hidden cost of accepting card payments, namely the time, effort and money incurred by a merchant to recover money from middlemen who enter the picture in cashless modes of payment. This is over and above the aforementioned MSC / MDF fees.

Take a small business accepting card payments on its website via PayPal or a similar Payment Service Provider (PSP). The money first goes into the PSP’s account. In theory, the PSP has to transfer it to the merchant’s bank account on demand or automatically (within 24 hours, as is the case in India). From personal experienceand anecdotal evidence, it seldom works like that in actual practice. Not to single out PayPal but the PSP is well known for arbitrarily freezing merchant accounts. The merchant spends a lot of time and energy to appeal to the PSP for releasing the money. Only the anointed few get any response from the PSP. In most cases, the PSP unfreezes the merchant account only after 180 days. During this period, the merchant’s cash flow is adversely impacted. This is a huge hidden cost that doesn’t appear on any quotes or invoices.

What’s worse, hidden costs for cashless modes of payments can sometimes cripple a business. I read somewhere about an event organizer who sold out all tickets for a forthcoming show but couldn’t access the cash to pay artistes and rent because its account was frozen by the PSP. As a result, the company was forced to cancel its show and suffered a severe blow to its reputation from which it couldn’t recover.

Not even the harshest critic of cash would accuse that its hidden costs are so severe as to kill off a business.

Ever since I got my first credit card in the mid 1980s, I’ve preferred cards over cash for several reasons (think rewards for one!). However, the society wasn’t cashless then. More than 25 years later, it still isn’t cashless today. And I doubt if it will become cashless for another 189 years. I know that’s one year less than the figure I’d predicted in The Death Of Cash Is At Least 190 Years Awaybut that post is one year old now!

Because, thanks to the hidden costs of card, cash in hand will always be worth more than card in bush for many businesses for a long time to come.

Financial inclusion, banking the unbanked – call them what you will but, in a nutshell, the gist of these initiatives is:

People want to borrow money only from banks; people want to deposit their savings only in banks. But, since they can’t access a bank, they’re forced to turn to loan sharks and blade companies. To protect people from these undesireable elements of the society, banks should spread out all over the country so that the common man can easily find a bank at every corner. Technology is the answer.

The fundamental flaw with this approach and the premise upon which it’s based were both apparent to me when I recently visited several small towns in Tamilnadu and Andhra Pradesh, two states in South India. Virtually every high street I saw was lined with banks, ATMs, Western Union agents, pawn shops and gold loan companies. In short, I found all kinds of financial service providers coexisting peacefully with one another wherever I went.

Why do people patronize informal financial services when they can go to banks?

People have access to banks for loans and deposits. But they still go to loan sharks and blade companies. Not because they have to. Not because they are underserved. But because they want to.

They want to do that because the informal financial services sector delivers what are arguably the two most powerful drivers of consumer behavior: Speed and Greed (yes, they deserve to be capitalized!).

People enter a pawn broker or gold loan shop, pledge their belongings and walk out with cash. No credit check, no KYC, no empty promises of “we’ll get back to you in 7 working days”. No nothing. Just. Hard. Cash. So, the informal financial sector delivers speed. And, by no means is it restricted to India: According to this Boston Globe article, “Pawnbroking has been part of Western civilization at least since ancient Rome”.

When people can park their surplus cash in insured bank accounts, why do they trust their savings to a blade company? For the uninitiated, the monicker refers to fly-by-night operators that – ahem – fly below the regulatory radar and attract deposits at 200-300 bps higher than bank rates. They promise these inflated interest rates by claiming to invest in eucalyptus tree plantations, emu bird farming and other “rapid surefire routes to riches”. History is full of examples of blade companies – from Abhinav Plantation in the mid 1990s to Sarda Group last year – going bust in highly publicized flameouts, leaving their depositors high and dry. Despite their abominable track record, the next blade company is just around the corner. Why? Because they stoke greed. The Bernie Madoff Ponzi scheme illustrates that their ilk isn’t restricted to third world countries or to illiterate segments of the population.

Can banks use technology to match the informal financial sector in delivering speed and pandering to greed?

As a technology marketer, I’m tempted to grab every opportunity to position IT as the solution for everything. But, in this case, reality dictates otherwise.

The GFC has curbed the banking industry’s ability and / or appetite to invest in risky assets in the pursuit of higher returns. While banks can surely use technology to reach a wider audience from whom to garner deposits, their inability to offer higher interest rates would render them unattractive to greedy depositors. Hello next door blade company.

Ergo, even if financial inclusion spreads far and wide, banks won’t be able to drive away the informal financial services sector anytime soon.

Which is not be such a bad thing, seeing as how the common man is happy to patronize both of them side by side – or, as I noticed on one occasion, one on top of the other!

Smartphones and tablets are causing trouble for publishers for more reasons than one:

There are fewer ads on handheld devices due to their smaller displays

Mobile readers have a lower propensity to click ads (apart from nicely-obfuscated Google Ads, but that’s a story for another day)

As Digiday has found out, “Mobile CPMs are still significantly lower than its desktop cousin”

Third-party news apps are gaining traction as a preferred way to consume content on mobile. By aggregating articles from different websites and presenting them to readers in a uniform reading and sharing environment on mobile devices, these apps are robbing the very same publications of pageviews and ad dollars.

To counter the effect of Pulse, Flipboard, Zite, NewsHunt, News in Shorts and other popular third-party aggregator apps, publications like TechCrunch and The Next Web have resorted to cutting off their feeds at the 60th word of each article. To read the rest of the article, readers must tap away from the app at the end of the snippet and visit the publisher’s ad-filled website. Not sure how well this strategy will pan out since, according to anecdotal evidence, most people are content with the first 60 – or 100 or 200 words depending on the specific publisher’s policy – and simply slide to the next snippet inside the app. It’s only the rare article – 1 in 5 in my case – that drives readers to break their flow and read it in full on the respective publisher’s website.

News In Shorts cracks the Holy Grail of news apps by summarizing entire articles to 60 words instead of just displaying the 1st 60 words.

They can create compelling content that drives readers to “leave the page and head to the screen”, as FORTUNE magazine would want them to. After doing that, they could take Digiday’s advice to determine “optimal ad formats and placements” so that their readers stay engaged.

FORTUNE, Kargo and Facebook are making solid progress on these fronts but, for now, most publishers are wilting from the pressure of diminishing ad revenues from mobile.

PS: Another update from my previous post: I mobilized my blogs using free-of-cost Mofuse alternatives, namely, WordPress Mobile Pack for Talk of Many Things and BAAP Mobile Version for GTM360 Blog. Even without these software plugins, readers can comfortably view publications on smartphones and tablets by using Pulse and other third-party news apps.

The quick service restaurant chain FAASO’s recently launched MOBILE wrAPP, an ordering, payment cum loyalty app. Available on Android, iOS and Windows, the app lets users locate stores, browse the menu, place delivery or takeaway orders, and make online or cash on delivery payments.

To incent repeat purchase, the company credits INR 400 (~US$ 6.67) to a mobile wallet inside wrAPP. This feature introduces a loyalty angle to what’s primarily an ordering-cum-payment app.

More on that in a bit but here are a few quick observations about the mobile app:

By using omni QR code technology that automatically recognizes a smartphone’s operating system, the app could replace three different QR codes – one each for Android, iOS and Windows – by a single code. The space this would free up could be used to enlarge the QR code, which would increase its potential scan volume for reasons explained in Making QR Codes Work.

The item quantity selection button is a bit too small for fat fingers; the INR 400 wallet credit is easy to miss. Apart from these blemishes, the app has a clean layout.

Driving directions misses the chance to piggyback on turn-by-turn navigation supported by Google Maps for many cities in India, including the ones in which FAASO’s has a presence.

The app seems to be well integrated with the billing system – my receipt was clearly marked with “APP ORDER”.

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Now, moving on to the loyalty part of wrAPP.

Replace 3 QR Codes With One

As mentioned earlier, the app credits INR 400 at start. In case diners think they can place an order worth INR 400 and get their food free by offsetting the cost against the wallet credit, FAASO’s reminds them that there are literally no free lunches.

The way the wallet works, the reward can be redeemed by way of discounts on orders at the rate of INR 50 discount per INR 250 order. Therefore, an order of INR 400 would be eligible for INR 50 discount (and the diner would still need to pay INR 350).

By requiring multiple orders for redeeming the entire credit of INR 400, the app drives repeat purchase, which is one of the basic goals of a loyalty program. Orders can be placed in any one of the following permutations and combinations:

8 orders of at least INR 250, with a discount of INR 50 per order, or

4 orders of at least INR 500, with a discount of INR 100 per order

etc.

No matter which option is chosen by the customer, she’d need to spend a total of INR 2,000 (8 x 250 or 4 x 500 or …) to “burn” the total INR 400 reward. This translates to a Burn Ratio of 2000:400 or 5:1, which is not as attractive as the 4:1 figure that’s in vogue among credit card, PAYBACK and many other loyalty programs.

The app freezes if there’s a loss in Internet connectivity during card payment. Even returning to the applications screen and tapping the app’s icon brings back the same frozen screen. The only way I could get rid of it was to tap the Force Stop button on the Task Manager and fire up the app again. When I did this, my order was lost and I had to start all over again. This gives me – and many other customers, I’m sure – one more reason to opt for Cash on Delivery. Whether by design or default, FAASO’s has backstopped this problem by allowing the wallet credit to be applied to both card and COD orders – unlike many other online businesses that give discounts only for online payments.

The company’s flexibility about mode of payment doesn’t extend to the ordering channel, though. The discount is only applicable for orders placed through the mobile app. There’s no delivery charge either. In other words, food worth INR 250 would cost INR 200 if the order were placed on the mobile app whereas an instore customer ordering the same food would have to cough up the full price. This is a rare example of a price discrimination strategy in India. Only time will tell whether it’d drive a greater percentage of traffic to the mobile channel – as the company undoubtedly wishes – or trigger complaints from walk in customers who find out that they’re not eligible for discount.